As more and more exchange traded fund (ETF) providers and mutual fund managers get in line to offer actively managed funds, many are wondering if this is the next wave in the industry.
Top mutual fund companies are considering entering the actively managed ETF business to expand their offerings. Among those who have already joined in or have filed to do so include John C. Hancock Funds, T.Rowe Price Group and PIMCO. [Read about Hancock’s filing here.]
Jessica Toonkel Marquez for Investment News reports that there are now 15 actively managed ETFs on the market, and the number is expected to rise to 40. The number of providers offering such funds could rise to 15 from the current seven. [Why are big names attracted to active ETFs?]
The issue of daily disclosure of holdings within the funds has been the primary obstacle, because providers are concerned about the potential for front-running as well as the effect that such disclosure would have on mutual fund shareholders the ETFs mimic.
Other asset managers, while now unsure of demand for actively managed ETFs, want to hedge their bets in case mutual fund 12(b)-1 fees are abolished and brokers are more willing to try the new product. [What’s a 12(b)-1 fee?]
So far, there seems to be a “wait-and-see” approach when it comes to active ETFs. But if companies come out with actively managed ETFs containing elements that aren’t available in traditional mutual funds, advisors may decide not to wait for a one- or three-year track record. [How else active ETFs are catching on in the industry.]
For more stories about actively managed ETFs, visit our actively managed ETF category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.